Sales leaders: If you could only track one performance metric to evaluate the performance of a member of your sales team, which one would you choose?
Lots of sales managers I talk to have already answered that question without giving the matter too much thought: their go-to metric is closed sales. That’s the number they check in on most consistently. They usually do that by means of three questions:
- What’s closed recently?
- What’s about to close?
- When will that close?
That first question, of course, points us toward recent commitments to buy that have actual revenue attached to them. It’s natural that we should be curious about that. And fortunately, whatever we hear from the salesperson can be confirmed without much difficulty. But is it really the best question to ask a salesperson? Couldn’t we ask someone else in the organization about this and get just as much information?
Those second two questions may seem like spinoffs of the first, but if you look at them closely you will realize that they are really quite different. They ask the salesperson to tell us what’s in the pipeline, not what real-world revenue commitments have come in. Naturally, we’re curious about that, too – but have you noticed that the answers we get to these questions often fall short in the predictive accuracy department?
The first question on that popular list of queries, What’s closed recently?, uncovers what is known as a lagging indicator. That means it tracks the outcomes of revenue-generating behavior that took place weeks, months, or perhaps even years ago. Not a great metric to watch. The second and third questions fall short, too, because they ask salespeople to give us their (inherently subjective and perhaps unreliable) “best guess” as to when another lagging indicator will show up. There’s nothing to count.
None of these questions track behavior, which is what we really want to know about.
If I wanted to evaluate a salesperson’s performance and I could only track one metric, I wouldn’t ask about closed sales. I wouldn’t count on the salesperson I was working with to give me an accurate assessment of when a given deal was going to close, either. It would be nice enough if they were able to do that, of course, but I wouldn’t want to bet anything important on the accuracy of that guess.
So: What would I measure? I would pick a leading indicator. That’s a verifiable number that connects to some countable recent behavior that has a direct impact on future revenue. Which metric would that be? Well, given that for most of the teams I work with, prospecting behavior is the driver of everything, I would ask that salesperson how many initial face-to-face meetings with prospects had taken place over the past seven days.
Of course, these meetings could take place in person, over the phone; via videoconference, or in person. What I am interested in counting is real-time voice-to-voice conversations with new contacts.
Note that I’m not choosing to track second, third, or fourth discussions. Those numbers are interesting, but if I’m limited to one metric that is going to tell me how a given salesperson is doing, I want to know about initial discussions with brand-new contacts. That number is going to tell me whether the person is connecting with enough suspects to maintain a healthy pipeline filled with qualified prospects. That number will tell me whether they are likely to drive real opportunities through the funnel. That’s the key performance indicator, or KPI, that I recommend sales leaders keep a close eye on.
Take a close look at the leading indicators … and the lagging indicators will take care of themselves!
Read this blog post to learn how to build the right team to drive revenue growth.